ALEX BRUMMER: Confidence needs a boost


ALEX BRUMMER: Confidence needs a boost to lift Britain out of its Covid slump

The year began with a wave of optimism on the back of the UK’s vaccine rollout. 

But as the Government imposes draconian travel restrictions and there are warnings that summer holidays may have to be written off, optimism about a rapid recovery and a revival of consumer and business confidence – in spite of the build-up of a wall of £125bn of savings – is endangered.

My daily inbox is inundated with anxious emails from business groups. The least that could be hoped for is that the Chancellor Rishi Sunak and Business Secretary Kwasi Kwartang try to sprinkle stardust over recovery prospects.

As the Government imposes draconian travel restrictions and there are warnings that summer holidays may have to be written off, optimism about a rapid recovery is endangered

As the Government imposes draconian travel restrictions and there are warnings that summer holidays may have to be written off, optimism about a rapid recovery is endangered

Not surprisingly, the airline and airport industries are in despair, arguing survival is harder by the day, with almost zero revenue and a huge cost base.

As a result of paralysis in the skies, Rolls-Royce is planning to mothball aero-engine plants with an impact on a critical supply chain. The UK’s entrepot and services-driven economy is gasping for breath.

Promised help for the Events Industry Alliance, which comprises exhibition and conference organisers, venues and suppliers, is stuck. 

An estimated £1.4billion of Government grants remain locked up in local authority bureaucracy, with many smaller players facing bankruptcy.

READ  Reliance Jio buys back bonds for Rs 800-1,000 crore

The British Beer and Pub Association is demanding a road map to recovery with sales down 56 per cent and Food to Go services stymied. 

The concern must be when the hospitality industry emerges from hibernation not only will there be far fewer outlets but many will have fallen into the hands of ruthless short-termist profiteers.

The triage system for the smallest businesses, in the shape of Bounce Back loans, is in danger of leaving a legacy of ‘zombie’ firms, killing entrepreneurship. 

It is terrific that International Trade Secretary Liz Truss has just concluded new preferential trade arrangements with fast-growing India. 

But it won’t be much good if our manufacturing and service industries are holed below the waterline.

Green fingers

The speed of adoption of environmental, social and corporate governance (ESG) ideas is amazing to see. 

It is changing big oil before our eyes, with BP and Shell going headlong into new technologies, from offshore wind to hydrogen. Fund managers from US giant Blackrock to Britain’s M&G are moving in a sustainable direction.

An ESG creed is manna for heaven for policy makers deemed to be made of the right stuff. 

Not so long ago, Chuka Umunna was seen as a potential leader of the Labour Party before a political journey saw him driven out to join a new party Change, off to the Lib Dems and then out of politics.

He is now finding a new home at JP Morgan as ESG chief for Europe and the Middle East. His arrival is no accident. The bank’s chairman and CEO, Jamie Dimon, is embracing the ESG agenda.

READ  MARKET REPORT: Defence contractor Chemring falls 8% after disguised profit warning

But he and activist investor John Harrington have been less than successful in persuading JP Morgan’s board that it is time for the most blue-blooded of US banks to change its status to a ‘public benefit corporation’ which reaches a broader range of stakeholders, including workers and customers. 

Efforts to persuade US companies to reshape generally have had a poor reception – but at least Bank of America is promising a shareholder vote.

The danger for Umunna is that, cut off from New York in Europe, he will not have clout to change much. 

He comes with very different credentials to former Bank of England Governor Mark Carney, who has joined Brookfield Asset Management to lead the £400billion fund’s ESG strategy.

Carney, the first central banker to demand finance prepares for climate change, is Boris Johnson’s adviser to the Cop26 summit scheduled for Glasgow in November, and recently delivered on-message Reith Lectures. Those are impressive credentials.

Old timer

An early task for a Mario Draghi-led government in Italy will be what to do about 64 per cent state-controlled Monte dei Paschi di Siena, the perennially sick bank which has run up losses of £1.5billion and wants further state backing to merge with Unicredit.

That the Tuscan lender has survived after countless rescues since the financial crisis is because no government has felt confident enough to pull the plug on the world’s oldest bank. Time to put it out of its misery.

READ  Pound smashes through $1.40 over vaccine rollout



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here